Europe less enthusiastic than America about fracking

Michael Kavanagh writes a good article in the Financial Times explaining the differences in opinion between Europeans and Americans over establishing a shale gas industry. The Polish are the least hostile, in large part to reduce dependence on Russian gas.

 

Hostility limits growth of fracking in Europe

As the US shale revolution continues to transform the country’s energy supply, progress towards establishing whether Europe can follow in North America’s footsteps is at a snail’s pace.

Fracking bans across many EU countries continue, with little sign that heightened concerns about energy security prompted by Russia’s behaviour over gas supplies will prompt a significant reversal in policy.

Meanwhile, in Poland and the UK – the two countries with plenty of shale resources and clear government support for exploration – there is still no clear evidence that shale gas and liquids can be extracted on commercial terms.

But, despite setbacks and opposition from environmental groups, early stage explorers remain confident they are poised to go some way towards replicating the success of US pioneers in establishing shale gas as a significant energy source in Europe.

Andrew Austin, of IGas Energy, a UK explorer, says his company is to flow-test two wells aimed at demonstrating the commercial potential of the Bowland Basin, which stretches across northern England.

Further work is expected from Cuadrilla Resources, whose appraisal work in east Lancashire was blamed for minor earth tremors and prompted a temporary ban on fracking in 2011.

Mr Austin says: “We know there’s lots of gas there, but we need to know what it takes to make it flow in a commercial operation.”

He believes the investment market could be transformed by successful outcomes from a wave of flow-testing at fracked wells planned across UK sites.

Amid all the hype surrounding the UK’s shale potential, exploration work remains extremely limited.

But Mr Austin says that stake building in acreage positions by Centrica of the UK and Total and GDF Suez of France over the past two years has demonstrated the interest of energy companies in taking early stage positions.

“A lot of areas of interest that are potentially available for licensing are already operated. I think we will see some new entrants and surprising faces,” he adds.

But, in Poland, where fracking tests have been more extensive than in Britain, disappointment in drilling has cast a shadow over the shale exploration sector, which has seen a number of groups abandon the field.

Last month, 3Legs Resources, a London-listed early player in Poland, became the latest to throw in the towel by announcing it would be relinquishing its interests in a concession where it has been partnering US major ConocoPhillips. Although some gas and oil had been produced at its latest fracking well in Poland’s Baltic Basin, the company concluded that flow rates were not commercially viable and did not justify further investment.

In Poland, more than most countries in Europe, the ambition of loosening dependence on gas supplied from Russia has been a big factor in ensuring government support for fracking.

Oisin Fanning, executive chairman of San Leon Energy, insists his exploration commitment in the country remains unaffected by 3Legs’ decision to fold its position.

Operators in Poland are continuing to co-operate in the sharing of data from a growing number of wells that have demonstrated the potential for gas and oil to be economically extracted, he insists.

Mr Fanning suggests a willing Poland remains well positioned to beat the UK to the line in establishing itself as a commercially viable shale producer of note.

“Eighty per cent of the population is in favour,” he notes. “The UK won’t be as easy as Poland.”

Melissa Stark, an analyst at Accenture, a consultancy, says both countries are well positioned in terms of access to workers, oil services equipment and infrastructure to bring any shale gas and liquids to market, should they be discovered in commercial quantities. However, she concedes, there has been little change in generally hostile attitudes across the EU this year.

Such a shift would be required to challenge the widespread bans that prevent shale exploration across much of western and central Europe.

“Not much has changed in recent months and not much will change until we see success,” she says. “What’s needed are commercial geologies in the UK and Poland.”

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